What is a fintech start-up?

In 2017, a whopping $1.8bn of venture capital was invested into fintech start-ups in the UK.

Fintech is a sector that’s well and truly booming, with fast-growth challenger start-ups really starting to make their mark on what was traditionally an old-fashioned industry dominated by a few big players.

But, what exactly is a fintech start-up? And who’s big on the scene right now?

In this article we’ll cover:

1. What is a fintech start-up?

The best way to define a fintech start-up is to break the term in two. Firstly, fintech (financial technology) is, quite simply, technology that aids financial services. For example, your online bank account is a type of fintech.

A start-up is generally considered to be an emerging business, no more than five years old. Known for having an open-minded culture and willingness to embrace change, they’re usually pulsing with energy, excitement and a sense of possibility.

2. How has fintech evolved?

Fintech formerly focussed on technological innovations regarding business transactions (ie: digital bookkeeping). But recently, the term fintech has evolved to cover all things financial, both commercially and personally.

The mobile-internet revolution has had a profound impact upon the volume of fintech service users and providers. With a reputation for being ‘disruptive’, fintech is making a place for itself in a market previously monopolised by a branch-banking culture.

Facilitating a more personal approach to finance, fintech allows users to engage with finance on a smaller, bitesize scale. Due to fintech’s niche-focus approach, the heavy regulatory scrutiny faced by bigger banking systems is avoided.

And importantly, fintech is smart. Saving apps such as Chip and Squirrel use AI to detect repeat spending habits, learning these patterns and saving the user money in the long term.

3. Top fintech start-ups

Some of the top fintech start-ups to have emerged over the past four years include the likes of Monzo, Starling Bank and Monese. But what is it that makes a fintech start-up so unique? For a start, ownership and visibility.

Termed ‘challenger banks’, the most successful fintech start-ups are providing a service no longer offered by typical, physical high-street banking.

Fintech start-ups aren’t restricted by clunky or outdated systems and make being dictated by strict opening hours a thing of the past. From mortgages and pensions to direct-debit management, fintech start-up users have access to the desired service at their own convenience, enjoying 24 hour account visibility and complete customer control.

Fintech start-ups to watch:

Below, we’ve rounded up six of the hottest fintech start-ups right now.

Starling Bank

Founded in 2014, Starling has been providing a digital, mobile-only current account service for four years. Offering a business account and payment services, Starling Bank is a clear market leader in the fintech start-up sector. Its stand-out feature is the app’s integration with both Apple Pay and Fitbit Pay, further defining the convenience-focussed movement within the fintech start-up community.

Monzo

Established in 2015 by Tom Blomfield (former co-founder and chief technology officer for Starling Bank), used to be called Mondo but had to re-brand once it realised the name had already been claimed by another company.

Another mobile-only banking system, Monzo’s aesthetic is built around an unmissably bright shade of pink neon (or, as they call it, ‘coral’). Bold, in-your-face marketing that offers a service and wants you to know it. Its ‘fun loving’ image and money saving advice has really helped Monzo tap into the millennial market. From students to young professionals, and now 16-18 year olds, Monzo even offers an overdraft service for 50p per day.

Monese

The mobile-only banking app that applies a “let me take a selfie” attitude to finance. Alongside a picture of your passport/identity card, a selfie is all the personal information Monese requires to create a current account. The London-based app launched in 2015, have gone from strength to strength, and in 2017 closed a $10m Series A funding round from Anthemis Exponential Ventures, STE Capital, Korea Investment Partners, Seedcamp and SmartCap.
With Monese you can go online shopping, make local or international transfers and even receive a salary straight into the banking app, all without registering a permanent address.

Habito

Having been established for two years, and coming in at an impressive number 12 on this year’s Startups 100 list, Habito is a completely free and digital mortgage comparison service. Customers can bypass the ‘prove yourself to your bank’ stage of getting a mortgage, and instead fill out the necessary forms from the comfort of the sofa.

To get the best deal, Habito scans over 90 lenders and 20,000 mortgages, even advising you to go directly to the lender if that turns out to be a more cost-effective option. The secret to the free fintech start-up’s success? It gets paid by the lenders, instead of charging the users.

Welendus

With a “from the people to the people” attitude, Welendus has revolutionised the concept of the short-term loan by creating an ethical, affordable and flexible way to borrow money. Allowing customers to be either a ‘lender’ or a ‘borrower’, lenders provide investment funding and can earn from 5-15% a year, while borrowers can borrow between £50 and £500 with flexible repayments and all-the-way financial advice and support.

Having launched late last year, the business is already predicting a £6m turnover for 2018.

Flux

Loyalty cards. The country’s wallets are full of them, but the right one is never there when you need it, right? Well, Flux has done away with this issue, offering a service that collates loyalty points and receipts into one handy app.

Flux’s munch-busting network includes Itsu, Pod foods and EAT with Costa rumoured to be joining the family soon. When users pay with their bank card at registered vendors, Flux takes care of the ‘paper bit’, alleviating purses bursting with multiple cards for the same coffee brand.

While not the only contender in the space, the funded start-up is already making waves in the industry.

Is fintech just a craze?

The step away from high-street banking, and distinct lean towards emerging fintech companies, could be born out of a growing millennial distrust of a traditional, clunky banking system that has seen multiple financial crises. People are now stepping towards the cleaner, swifter and, most importantly, more convenient financial services offered by fintech start-ups.

The fintech start-up boom hinges upon the fact that each one has a singular financial focus. But, having separate apps for your direct debit account, loan management and pension pot could get bitty and confusing. Traditional high-street banks combine a multiplicity of financial services under one roof and on one platform, the convenience of which could turn out to be their saving grace.

Watch this space…